Update on Draft Amendments to Taiwan’s Government Procurement Law
by Melanie Ho
Connection between the Taiwan Government Procurement Law (“GPL”) and the GPA
In order to join the WTO's Agreement on Government Procurement (“GPA”), Taiwan government enacted and promulgated the GPL on May 27, 1998, which took effect one year as a buffer period after the promulgation. After several years’ endeavors, Taiwan’s accession to the GPA was adopted by the WTO Government Procurement Committee on December 9, 2008. Through the official approval process of the Executive Yuan, the supreme administrative branch and the Legislature from December 2008 to May 2009, the accession bill was ratified by the President on June 8, 2009. The GPA has entered into force on June 15, 2009 in Taiwan.
The structure of the Taiwan GPL is generally based on the GPA. That is, the Taiwan GPL has adopted the main articles of the GPA and its updates in April 2012, including “Scope and Coverage”, “General Principles”, “ Information on the Procurement System”, “Notices”, “Conditions for Participation”, “Qualification of Suppliers”, “Technical Specifications and Tender Documentation” and “Limited Tendering” and “Treatment of Tenders and Awarding of Contracts”, etc. There is an official website “Government Procurement Information System”. where the tender notices of government procurement are required to be published and you may search the procurement which date of publication is less than 90 days in the section of “Summary Tender Notice” there.
For the procurement cases covered by the GPA, the tender notices shall state the applicability of the GPA, and the procuring entity shall publish a summary of the tender notice in English, including the name and the address of the procuring entity, the subject-matter of the tender, the deadline for submission of tender, the place from which tender documentation, i.e. the Invitation to Bid (“ITB”) may be requested. To foster a foreign-investor friendly procurement environment has been initiated for years. As to the language of the ITB, even for the procurements where the GPA is applicable, the procuring entities may only provide the ITB in traditional Chinese. The issue concerning official English translation of tender documentation has been raised by foreign suppliers/tenderers for years. Currently, the bidders have to complete a translation of the tender documents by themselves. As a result, inconsistency of translation of the terms and conditions may often arise. In particular, the terms and conditions in the procurement contracts stipulated by procuring entity are critical for potential tenderers to access the risk and feasibility of participating in the procurement. For the decades, a number of foreign tenderers/ suppliers have suggested the Taiwan government to encourage the procuring entities to provide official English translation of tender documentation for ease of understanding for international tenderers. So far it is still not mandatory that the procuring entities have to provide official English translation of tender documentation. Nonetheless, we have seen more and more individual procurements in particular the potential tenderers may come from abroad, the procuring entity is more willing to provide, at least, an English translation of the terms and conditions of the contract. With respect to the language of the tender to be submitted, the procuring entities may prescribe in the ITB that the tender submitted shall be prepared in traditional Chinese or it may allow the tender submitted in English provided that the requirement is prescribed in the ITB.
Proposed Amendments to the Taiwan GPL regarding Tender, Procurement Contracts and Debarment
In order to improve the efficiency of government procurement, the Executive Yuan, has passed the proposal for amendments to Taiwan's GPL to be submitted to the Legislature for deliberation on October 12, 2017. Many of these proposed amendments intend to simplify the procedure for participating in procurement activities in Taiwan, which may affect both foreign and domestic suppliers/ contractors in the future.
The following are some notable takeaways mentioned in the administrative branch's official proposal (“Proposal”):
1. Expansion of Adoption of the Most Advantageous Tender
According to the current Article 52 of the GPL, the most advantageous tender shall only be applied to certain types of procurement where tenderers are allowed to submit tenders for construction work, property or services with different qualities, technologies, functions, benefits, etc. and the tender with the lowest price is not suitable in such cases. Such situation has been strongly criticized by public opinion for years.
To accommodate the different needs of the procuring entity in individual procurement cases as well as to comply with the GPA, the Proposal suggested that the current clause should be deleted and therefore, the procuring entities may, at their decision to determine whether to adopt the most advantageous tender as the awarding procedure if they view the procurement with different qualities in consideration of technologies, qualities, functions, benefits and the nature of the procurement involved. Such approach is expected to enhance qualified suppliers/contractors' participation.
2. Restrictions against Inducement to enter into a Procurement Contract
In the Proposal, in addition to commission, percentage, brokerage, kickback, which have been stated in the current Article 59 of the GPL, a tenderer or supplier is further not allowed to induce the establishment of a procurement contract by paying so-called "undue interest" to the procuring entity. Otherwise, in addition to the termination or rescission of the contract, the procuring entity may deduct twice of the amount of the undue interest and the premiums from the contract price. However, considering that there is no further requirement stipulated in the Proposal, it is still not clear that how the competent authorities will determine the specific content of "undue interest."
3. Changes in Requirements concerning Debarment
Article 101 (1) listed several situations under which the supplier would be imposed of debarment by the procuring entity. From the perspective of providing better protection in procedures, the Proposal guarantees the supplier an opportunity to provide opinions verbally or in writing before the procuring entity issues the notice regarding debarment. In addition, in order to enhance the supplier’s liability of supervising its personal, the Proposal suggested that "the intention or negligence of the supplier's representatives, agents, employees or other workers who commits the acts listed in Article 101 (1) shall be deemed to be the intention or negligence of such supplier, unless the supplier can successfully argue that it has duly executed the care to select and supervise its representatives, agents, employees or other workers. However, if the personnel of the supplier mentioned in the above is determined to have been committing the crime of disturbing the procurement process by a first-instance court as provided in Articles 87 to 91, the supplier itself will be charged with criminal fines, in which whether the supplier is negligent or willful will be determined by the court. It may be difficult for the supplier in such situation to argue that it was not negligent in these circumstances.
4. Alternative Option to Mediate a Dispute with the Procuring Entity
Currently Article 85-1 of the GPL stipulates that in the event that the procuring entity and the supplier failed to reach an agreement over the dispute arising from the contract, either of (i) applying to the mediation committee designated in the GPL for mediation or (ii) referring to an arbitration institution for arbitration may be used to resolve the dispute. In the event that the application for mediation is made by the supplier, the entity may not object to such application. The mediation committee shall offer suggestions or proposals for mediations concerning the dispute arising from the contract of construction works or technical services. In the event that the mediation mentioned in the above is not successful because the procuring entity does not agree with proposal or resolution for mediation so proposed, the entity may not object to the arbitration filed by the supplier.
Although not suggested by the administrative branch, it is disclosed in the legislators' proposal that Paragraph 2 of Article 85-1 should be expanded to include the disputes arising from property or service procurement, so that in the event that the unsuccessful mediation of such procurement due to the entity does not agree with proposal or resolution for mediation rendered by the mediation committee in charge of the dispute, the entity may not object to the arbitration filed by the supplier. In addition, the legislators' proposal also list that a supplier can mediate the dispute arising from the procurement contract before an arbitration institution, in addition to the existing mediation organization. We believe that the above approach probably may be considered by the Taiwan government to reflect it in the amendments in the future as expansion of arbitration application to the government procurement contracts should be a potential development for countries which desire to attract more investors from abroad.